Posted by: Josh Lehner | November 23, 2021

No Pandemic Migration Boom in Oregon

Last week Portland State University’s Population Research Center released their initial estimates for 2021 population in Oregon. The release seems to have flown under the radar a bit, and it really shouldn’t. Our office tried to incorporate it the best we could in our forecast release, but with given the Tuesday data release and Wednesday forecast release, that proved challenging as well. We will continue to explore the numbers and their implications in the months ahead. Big picture, population growth is vital to Oregon’s faster economic growth as it helps provide the labor force needed for local businesses to hire and expand.

The upshot for the new release is there has been no pandemic-related migration boom in Oregon. That runs counter to the conventional wisdom, and certainly counter to many housing market discussions. This has been something Kanhaiya Vaidya, the state demographer in our office, has been on top of since the start of the pandemic. His population forecast called for slower population gains last year and this year, with migration rebounding in 2022 and beyond.

The primary reason for slower gains is that migration is pro-cyclical. As job opportunities dry up in recessions, migration slows and as jobs become more plentiful in expansion, migration accelerates. To the extent there as been any real pandemic-related migration, it has not been large enough to offset these traditional dynamics.

Now, PSU’s estimates are mid-year, or July 1st estimates. Given the economy and labor demand is booming today, expectations are migration is also picking up. This is confirmed by things like more surrendered driver licenses at the DMV in recent months.

The other contributing factor to slower population gains, as discussed before, is that deaths now outnumber births in Oregon for the first time. The state is fully reliant upon net migration for any population gains today, and our office expects this to continue every year into the future as well.

Two notes on pandemic-related migration. First, much of the discussion in the past year or so has been based on anecdotes, or online home search patterns and the like. We have lacked any hard data to really have a discussion. That has changed now.

Second, only 1 in 3 workers can theoretically work from home due to the nature of their jobs. That means 2 in 3 need to physically be somewhere to build homes, give care, cook meals, and so forth. Some basic math shows that it’s really only a small slice of the overall population we are talking about, and even smaller for purely remote work and not a hybrid model of a couple days at home and a couple in the office.

A very important technical note: Portland State released revised 2020 and preliminary 2021 estimates. The next step is to go back to revise the 2011-2019 estimates to make sure they align with the 2010 and 2020 decennial Census data. These so-called intercensal years (2011-19) have not yet been revised at the county level. That process takes time. Thankfully, Kanhaiya has done so for statewide figures, which can be found in our forecast tables. This matters for helping put the 2021 growth rates in perspective. At the local level we cannot really do this quite yet.

Even so, the estimates indicate that 30 out of Oregon’s 36 counties saw population growth in the past year. The fastest growing counties were Morrow (3.4%), Crook (2.5%), Gilliam (2.2%), and Deschutes (2.1%).

At the regional level every region in the state added residents, except the Gorge where slight estimated population declines in both Hood River and Wasco offset the gains elsewhere. Overall the Gorge is estimated to have lost 40 residents, which for all intents and purposes is a stable population, albeit one with a negative sign in front.

Due to the strong gains in Crook, Deschutes, and Jefferson (1.4%), the East Cascades region once again led overall population growth. Now, if there were any pandemic-related migration booms in the state, Central Oregon is the place the data indicate it did occur. Even so, growth rates do not look to have accelerated so much as did not slow down as much like elsewhere across the state. This should come into focus more clearly once the county intercensal estimates are available, so we can get a better handle on the the past handful of years overall.

All three counties in the North Coast Region – Clatsop, Lincoln, Tillamook – grew at above-average rates last year. Given the employment strength seen in both the Rogue and Willamette Valley regions of the state, the slower population gains are somewhat of a surprise. It is likely that lack of in-person schooling impacted Benton (Corvallis) and Lane (Eugene), as both counties saw small population losses. Much of rural eastern and southwestern regions of the state saw population gains that were slightly slower than the statewide average.

Finally, the Portland region grew slightly faster than the rest of the state. These gains were a bit stronger in Clackamas and Washington, while Multnomah’s growth was 0.003% slower than the statewide average. While more people moved into the state, region, and city than moved out, it is here, among the relative patterns that we can monitor any potential shifts in household preferences for urban vs suburban living moving forward.

Bottom Line: Total population is a driver for overall economic activity as more households create local demand for housing, food, entertainment, and the like. More households earn more money, boosting public sector tax collections alongside increasing local business revenue. Working-age population is the key for local economic growth as it provides the labor force from which local businesses can hire and expand. Population growth tends to be pro-cyclical. As we are now in an inflationary economic boom, expectations are migration flows will return in the years ahead.

Happy Thanksgiving everyone!

Posted by: Josh Lehner | November 17, 2021

Oregon Economic and Revenue Forecast, December 2021

This afternoon the Oregon Office of Economic Analysis released the latest quarterly economic and revenue forecast. For the full document, slides and forecast data please see our main website. Below is the forecast’s Executive Summary and a copy of our presentation slides.

The economic recovery from the pandemic continues to be robust. Booming wage gains are now offsetting the fading federal aid. Household incomes and consumer spending remain strong, supporting an overall bright outlook. The economy is set to reach full employment a year from now, or three times faster than in the aftermath of the Great Recession.

The fundamental economic challenge remains the supply side of the economy trying to keep pace with demand. Labor runs through everything, from production to logistics to sales. Firms are looking to hire as quickly as possible, while labor supply has been slower to recover. Labor shortages are likely to ease some in the coming months as more workers search for a job in earnest. Even so, the labor market will remain tight for structural reasons like more retirements and less immigration.

In a supply-constrained economy real economic growth is challenging. Firms invest in new technologies to raise productivity, but this takes time. Persistent inflation is a risk. The Federal Reserve, and many private forecasters, expect inflation to cool some as the impacts of reopening the economy fade and supply chain struggles ease. While not the baseline outlook, the ultimate risk is that the economy runs too hot and the Fed will raise interest rates sharply, creating a boom/bust dynamic in the years ahead instead of engineering a soft landing.

Recent forecasts have called for tax collections to return to earth. Federal aid has expired, and economic activity is beginning to return to normal with workers reentering the labor force, returning to offices and spending more on services. Instead of normalizing, however, revenue growth has accelerated further. In recent weeks, daily collection records have been set for both personal income tax withholdings and corporate tax collections. In addition, Lottery sales continue to set records for this time of year.

The revenue boom is being supported by a wide range of income sources. Most importantly, healthy gains in labor income are generating personal income tax payments. Despite Oregon having 70,000 fewer jobs relative to pre-pandemic levels, taxable wages and salaries are far above pre-pandemic trends. A persistently tight labor market is putting upward pressure on wages, leading to significant payroll growth despite the job losses.

The return of inflation after a 30-year hiatus is also generating additional revenue across a range of tax instruments. With demand so strong across the economy, businesses currently have a considerable amount of pricing power, and have been able to pass most of their cost increases along to consumers. As a result, profits and other taxable business incomes are booming. In addition to the direct boost to tax collections, healthy business earnings are supporting equity markets and other forms of investment income. 

Inflation is also generating additional Corporate Activity Tax collections. Business sales are taxed by value, not by the quantity sold. As a result, tax liability has risen along with prices, and is expected to remain higher throughout the forecast horizon.

The recent revenue boom, together with an improving outlook for labor earnings, have led to a significant upward revision to the outlook for personal and corporate income tax collections. The current forecast now projects both a $558 million personal income tax kicker, and a $250 million corporate kicker as the forecasts have been raised more than 2 percent since the Close of Session. However, considerable uncertainty remains. Although the baseline outlook calls for continued growth, overheating remains a real possibility. Inflationary booms of the sort we are experiencing today traditionally do not end well, putting recent revenue gains at risk going forward.

See our full website for all the forecast details. Our presentation slides for the forecast release to the Legislature are below.

Posted by: Josh Lehner | November 5, 2021

Single Family Rentals (Graph of the Week)

Happy Friday everybody! Just a quick note on something that has cropped up more than a few times during the pandemic: single family rentals. Depending upon who you talk to the concerns vary from local regulations pushing landlords to sell, thus reducing the number of rentals, to big institutional investors buying up homes to turn into rentals, or even ibuyers flipping homes quickly and distorting the market further. In a supply constrained market, it can certainly feel like every possible outcome is problematic because we have not built enough houses in recent decades. With that said, let’s turn to the data and the latest Graph of the Week.

Technical note: This data comes for the household survey and has a small sample size. As such we should take the precise year-to-year fluctuations with a grain of salt and focus on the larger trends.

Overall, the patterns seen in single family rentals in recent decades make intuitive sense. During the housing bubble, homeownership rose considerably, meaning there were fewer rentals. Following the foreclosure crisis these patterns reversed and there were record number of rentals as fewer people could afford, or wanted, or even qualified for ownership. In the second half of last decade homeownership rates rose and the rental share began to fall. During the pandemic ownership accelerated further as home sales boomed.

Where does this leave us? Right now it looks like single family rentals in Oregon are in line with historical norms, albeit on the lower end as ownership demand is strong. Specific issues like local regulations or institutional investors can matter, but they are likely more second order impacts rather than the primary drivers of the market, which continue to be demographics, income gains, and constrained supply.

Posted by: Josh Lehner | November 4, 2021

Oregon’s Workforce Outlook

The labor market is tight. Our office remains labor supply optimists in that workers will return in greater numbers in the months ahead. However with wages booming, this process may take longer than anticipated or be more of a steady stream versus a sudden rush. Even then, the labor market will remain tight for cyclical and structural reasons, it just won’t be acutely tight.

So what are businesses to do? Recently I chatted with the Springfield Chamber of Commerce on the workforce outlook. I hit on four main themes. Raise wages and/or increase flexibility. Increase productivity to offset fewer workers and/or higher labor costs. Tap into the latent labor force where there are tens of thousands of underutilized workers already living in our communities. Firms need to cast a wider net to draw in such individuals. Today, I wanted to highlight the fourth topic: workforce turnover.

But first, our friends over at the Employment Department recently released their latest job vacancy survey data. Oregon businesses are currently hiring for more than 100,000 positions. 78% of these vacancies are difficult to fill, a record. Firms are looking to staff back up as quickly as possible given strong household incomes and consumer demand.

Now, one big challenge firms face is employee retention. Workforce turnover is roughly 40% in any given year. That means there are a lot of bodies coming through the door and a lot of bodies leaving for whatever reason. The exact dynamics here vary by industry as seen below. Many of the sectors experiencing the most difficulty hiring today also experience the highest turnover rates in general.

Besides this general workforce churn, a complicating factor today is the record number of workers quitting their jobs. This increases the need for recruitment and also exacerbates the number of job openings businesses are looking to fill.

Research shows that the majority of these quits are workers leaving for another job, presumably a better opportunity. The job-switching rates are highest, and rising the most for workers without college degrees, and in lower-wage industries. Economically, we hope this results in a better labor match in terms of skills, hours, location, pay and the like. Plus if we are reallocating labor from lower-productivity sectors to higher ones, that will provide longer-term boosts to growth. But even if it’s more about taking advantage of signing bonuses and higher wages from competitors, that will raise household incomes in the lower parts of the distribution.

So why do workers quit? There is no single answer for most people, but in a study I read recently but cannot find a link to, it did show some differences between how workers and businesses think about quits. On the business side, they focus primarily on the hard math — wages, hours worked, etc. For workers, those certainly matter, but what also mattered are the harder to measure things like feeling valued, feeling that their job was worth doing, and having a good manager. While it can be harder to interpret feelings than numbers, the last item — having a good manager — crops up repeatedly across studies and surveys. We cannot see employee-supervisor relationships in the standard economic data, but they matter considerably for employee satisfaction, and for turnover.

Bottom Line: In a tight labor market, employee retention is even more important. There is a lot more workforce turnover than many people realize, so the challenges aren’t just warm bodies through the door, but retaining the workers businesses do have. Some of this comes down to the cold math. Starting wages today are essentially equal to median wages in Before Times for many of these sectors (manufacturing included, not just leisure and hospitality). But some of this comes down to harder-to-measure intangibles like workplace relationships.

Posted by: Josh Lehner | October 20, 2021

Labor Income is Booming

It has been our office’s view that what matters most for labor supply is total household income. If you have the financial cushion to not work given *gestures at everything* then some individuals will choose not to do so. Initially federal aid kept households afloat financially during a global pandemic. One result of the federal aid was that households built up a tremendous amount of excess savings. Expectations were, and continue to be that as those savings are spent, more workers will return to the labor market as they need to pay the bills and put food on the table. I remain a labor supply optimist.

It felt like much of the economic discourse earlier this year focused almost solely on the UI benefits. While clearly those are a big piece to the puzzle, they are not the only piece as our office has noted previously. The good news is this broader look at incomes is now coming into focus a bit more. See this really good Twitter thread from the NYT’s Ben Casselman yesterday for example. While it’s good the conventional wisdom is catching up, it’s also important to note that the story continues to evolve further.

In particular, labor income is booming. Underlying wage growth is taking the lead from the expiring federal aid. However this growth is happening among a smaller pool of workers than before. They are working longer hours and at higher pay. As shown below employment in Oregon is 4% below pre-COVID peaks and 6% below trend. However labor income is 4% above peak, and nearly back to trend. Payrolls have fully recovered even if employment has not.

Why does this matter and what are the implications? Well, for starters it means household savings are not being drawn down as much as anticipated even a few months ago. This is especially the case for households where at least one adult is working. The implications are that a second adult may not have to return to the workforce as quickly as expected given the income gains from the one earner plus the savings built up during the pandemic. In fact if you look at the latest survey from Indeed it shows the main reason job seekers are not urgently looking for work has shifted in recent months from COVID fears to financial cushion to spousal employment.

It’s important to keep in mind that the overall economic outlook remains bright. Strong household finances mean consumer demand is robust. But while it is encouraging that the economic discussion has shifted to focusing on total household incomes, the actual story continues to evolve. This payroll piece is newer in the sense that in aggregate it’s really starting to move the needle. Withholdings here in Oregon remain very strong. It also means that the risks that labor supply will take a few more months to fully return have increased. Our office’s view continues to be that the labor market will improve. Workers will return given job opportunities are more-plentiful and better-paying than before the pandemic, and as savings are drawn down. Even so the labor market will remain tight for structural and cyclical reasons, it just won’t be acutely tight.

Note that nationally the data show both strong hourly wage gains and a longer workweek, while the Oregon numbers show a steady workweek but even stronger hourly wage gains. The data can be noisy and we may have to wait for future benchmarks or revisions, but either way aggregate payroll growth is very strong

Posted by: Josh Lehner | October 13, 2021

Unhealthy Air Quality Days on the Rise in Oregon

Our office is working on some research related to the economic impacts of climate change and natural disasters more broadly. This is something we have done in bits and pieces over the years when it comes to wildfires, ice storms, droughts, Cascadia risks and the like. I’m also working my way through the virtual seminars on climate economics from the San Francisco Fed. I’m unsure what the end result will be. We know we need to stay on top of the research. Ultimately I’m envisioning more of an anthology of shorter summaries of the different avenues of research, rather than a giant report, but we shall see.

Today I wanted to share a quick look at something that’s missing from some of the earlier research. This is not meant to criticize anything, but rather to show how some of the dynamics are evolving and impacting our lives already. First, here is a famous map of the expected impacts of climate change from University of Washington’s Cliff Mass. This screenshot comes from a presentation I gave back in 2015. It makes a pretty compelling argument — as does other research from a decade ago — that the Pacific Northwest will be impacted to a lesser degree than the rest of the country. It even tells a relatively benign story of climate change for us locally. And while those relative dynamics likely remain true, it does not mean we are immune.

Wildfires are the one thing that jumps out to me today about the map that didn’t years ago. They’re not on the map explicitly, and to the extent we think of heat waves and water issues contributing, the idea of fires on the western side of the Cascades was not given a lot of discussion in the literature. After all, it rains a lot in the Northwest. Again, this is no criticism of Dr. Mass nor the earlier research. It’s probably more of a personal failing of not reading enough of the research at the time. Even so, what our office is trying to do is make sense of the impacts we’re experiencing now. And then to try and articulate the risks and build them into our forecasts where appropriate.

Now, to be fair, fires and smoke are a relatively new phenomenon. At least in terms of duration, or the number of days per year. Sacramento State’s CapRadio had a really interesting look at the changes in smoke over time and how it impacts the entire country. As I’m piecing together these bits of research, I thought I would share some of these impacts here in Oregon. The table below shows the number of really bad air quality days as reported by the EPA (AQI>150). These are days where you don’t want to be outside. If you include days where it’s noticeable that something is wrong, it adds a dozen or two more days to the counts. Also note that the map above was originally published in 2014. Almost all of our bad smoke years have happened since then.

You can take any of these counties and look at them individually. Below is a chart for Jackson County (Medford MSA) in part because the smoke in southern Oregon has been bad in recent years, and in part it has been bad enough that they are working on retractable roof theaters for the Shakespeare Festival and the like. If you can only go outside 11 out of the 12 months in a year, smoke mitigation makes a lot more financial and social sense than if it’s only a day or two.

Finally, what are the risks and costs to smoke and air pollution more broadly? There are economic impacts related to destroyed properties, and people not venturing outside for activities or travel. There are clear health impacts when it comes to respiratory issues leading to increased hospitalization and asthma medications and the like, some of which are discussed in the CapRadio work. However as documented here, there are also cognitive issues too related to pollution. Wildfire smoke is pollution. Studies show that chess players and baseball umpires make more mental mistakes on polluted days compared to non-polluted days, for example. Repeated exposure over time can also lead to longer term impacts as well.

Anyway, thought this was worth sharing while we continue to chip away at the broader research agenda. Stay tuned in the months ahead for more.

Posted by: Josh Lehner | October 5, 2021

Disrupted Supply Chains Across States

Right now consumer spending is strong, COVID is keeping some workers home sick, and factories and warehouses are operating at or near capacity. These factors result in struggling supply chains, bare shelves and rising prices. Firms are indicating that these issues are likely to persist well into next year. From an economic growth perspective what matters isn’t just when things normalize, but when do things stop getting worse. It is possible that we are currently at or near peak supply chain problems, but still quarters away from any return to normal.

Here in Oregon we have good and bad news. The good news is that we have less direct exposure than most states to these supply chain problems. Our manufacturers rely on imported intermediate goods less than most other states. This is largely because we rely more on local sourcing for wood products and food, and our largest valued added comes from locally grown ingots that turn into silicon wafers and the like. Additionally the movement of freight — the value of shipments relative to the size of the economy — is relatively smaller in Oregon than in many other states. That means the supply chain problems disrupt a somewhat smaller slice of the regional economy than is the case in the Midwest, for example.

Now the bad news. Even if we are directly exposed to a lesser degree, we are not immune. Supply chains that are global in nature impact everything. An old ODOT report estimates that 60% of all goods produced in Oregon will be sent out of state, while 70% of all goods consumed in Oregon will be brought into the state. Slowdowns at ports in southern California, or backups at rail yards in Chicago impact the ability of Oregon firms to get the supplies they need and for Oregonians to buy products at the store. High transport costs and supply chain problems are a macro constraint.

Where do we go from here? Broadly speaking there are a few potential avenues for improvements. First, as the pandemic improves, more workers can return to their jobs, improving production and the movement of goods within existing supply chains. Second, firms can increase their productive capacity to meet the strong demand. Not only would this boost economic growth, but a supply increase also would slow inflation. Included here would be added trucking activity to relieve the bottlenecks. The vast majority of freight moves on trucks. Third, consumer demand may cool, easing pressures. This could be due to consumers shifting their spending more into services as the pandemic wanes, or higher prices resulting in fewer goods sold, which would better align with current supply capabilities.

These bigger adjustments will take time. The silver lining today is vendor delivery times are no longer worsening economywide — they’re terrible but not getting worse in recent months — and business investment is strong. Supply chain improvements should be coming, but we’re a long way from normal.

Given these issues and requests for data, our office has pulled together a number of supply chain related charts which you can see or download below.

Posted by: Josh Lehner | September 28, 2021

Rebounding Air Travel in Oregon

Air travel was always one of the last things expected to rebound. After all, why would one willingly enclose themselves in a tight space with hundreds of strangers for hours on end during a pandemic? The main reasons are traditionally because we have to for work or family reasons, or because we want to visit a far-flung destination for fun. Well, nationally air travel (passenger counts) are about 80% recovered. Leisure travel as picked up due to strong household finances and pent-up demand. Many of us postponed vacations in 2020, for example. On the other hand, business travel remains down, weighing on urban economies around the country.

You can see these relative patterns here in Oregon when looking at passenger counts from our larger airports. In keeping with the major theme that it is the lagging in-person activities weighing on urban economies, the PDX passenger counts are still down around 30%, compared with our regional airports which have nearly fully recovered this summer. Eugene, Medford, and Redmond are all roughly the same size and have all experienced nearly identical patterns over the past 18 months.

But what has really stood out to me in the past year is that the PDX passenger numbers are pretty similar to the national figures. Yes, they’re 8-10 percentage points lower, but given the broader narrative that has seeped into the conventional wisdom, Portland really isn’t lagging too terribly much. Customer surveys indicate that business travel accounts for a little bit higher share at PDX than average, likely explaining some of the US-PDX gap. With all that in mind, I went looking for a handful of other major airports for comparison purposes. You can see the results below.

These airports were admittedly chosen somewhat haphazardly but purposefully based on geography and/or size. We have Seattle (SEA) for obvious regional considerations even as it is much larger, and San Diego (SAN) for both West Coast and airport size purposes. PDX traffic mirrors these nearly identically. Then you have Denver (DIA) for western states, Salt Lake (SLC) for western and size, and finally Nashville (BNA) for size comparisons. These three are all seeing stronger passenger travel numbers. They are also more of regional hubs with connecting flights than the west coast airports shown below, which have fewer connections and more origination/destination flights. That functional difference between the types of airports likely plays a role here. Even so, Colorado, Tennessee, and Utah’s respective state economies are also stronger than the West Coast states which have had more stringent health policies in place, which is a difference seen in the employment data when it comes to leisure and hospitality and education in particular.

Bottom Line: Air travel is continuing to rebound. Households have the income and pent-up demand for leisure travel. Oregon’s regional airports are seeing larger passenger counts as a result. However big, west coast metros continue to lag the recovery in part due to working from home, in part due to the lack of business travel, and in part due to the lack of in-person activities that cities traditionally thrive on. Even so, when it comes to Portland’s relative performance, it seems to be much more a matter of degree, not kind.

Posted by: Josh Lehner | September 23, 2021

Oregon Incomes Remain Strong (2021q2)

This morning the BEA released 2021q2 state estimates for personal income, which included some noticeable revisions which we’ll get into. As expected, incomes are down from the first quarter when the last of the recovery rebates was disbursed. However, incomes remain strong, and above pre-pandemic expectations even excluding the direct federal aid. Here is how our office wrote up the income situation in our latest forecast.

The primary reason for the strong economic outlook are household balance sheets. Consumers today have no shortage of firepower when it comes to their ability to spend, if they want to and/or feel safe enough doing so. Current incomes are higher than before the pandemic. Much of this increased income is thanks to direct federal aid. Here in Oregon, unemployment insurance has boosted incomes by more than $11 billion while the recovery rebates added nearly $13 billion. Combined this represents about an 11 percent boost to incomes in the state in the past 18 months. Federal policy has accomplished its job of keeping households above water during the pandemic. More encouragingly, underlying income that excludes the direct federal aid has not only recovered but has nearly regained its pre-pandemic trend.

Keen-eyed observers may notice that the 2020 cycle looks a tad weaker than in previous iterations of the chart. It is. A couple months ago the BEA incorporated the latest round of revisions at the U.S. level and they were negative. Those downward adjustments are now feeding through into the local data. What’s of note here is these adjustments are almost entirely to non-wage income, just as they were to the national data. Dividends, interest, and rent have been revised down over time, while nonfarm proprietors’ income over the 2018-2021 period. The proprietors’ revisions in particular are counter to the ongoing strength seen in Oregon business-related taxes paid. Both the traditional corporate and the pass-through revenues have been stronger than anticipated, especially during the pandemic. Given the BEA eventually uses tax returns to help benchmark the data over time, our office anticipates these income estimates will be revised higher in the years ahead, but for now this is where they stand. Note the gray, All Other line in the chart. This is the usual pattern you see in the BEA data where there are slight adjustments to the past couple years of data. Nothing really to note here other than both wages and unemployment insurance have been revised up somewhat.

Finally, any time there are revisions it’s important to check out they play out locally versus elsewhere around the country. By and large, Oregon’s income revisions match the patterns nationally. The big improvements Oregon has experienced in our relative incomes in the past decade remain intact. Over the past year, Oregon’s per capita personal income is 94.7% of the U.S., the highest positions we have seen since the mid-1990s. Oregon’s average wage is a bit stronger, standing at 96.1% of the U.S. This is effectively as strong as Oregon has ever been. The absolute peak in the relative wage data was 96.5%, reached one time in 1980 — really the 1979q2-1980q1 average — and never to be seen again as the bottom was about to fall out on the timber industry. With this in mind, I’m dusting off the following passage talking about these wage trends.

Oregon’s average wage, at least in the past 50 years, has always been below the national average wage. We took a huge step back during the 1980s when the timber industry restructured. Oregon lost 12% of its jobs in the early 80s recession, whereas we “only” lost 8.5% of our jobs in the Great Recession. During the technology-led expansion in the 1990s, we regained about half of the decline in average wages and that held steady for more than a decade. However, since the Great Recession Oregon’s wages have outpaced the nation’s by a considerable margin. Oregon’s average wage today is at it’s highest relative point in more than a generation. Or put differently, Oregon’s average wage today is at it’s highest relative point since the mills closed in the 1980s. Some of this is due to the fact the recovery in Oregon has been led by high-wage jobs, even to a larger extent that nationally has been the case. But this industry or occupational mix can only explain a portion of our relative wage gains. The bulk of Oregon’s improvement here is due to stronger wage gains within industries and occupations. This is great news.

Looking forward our office expects Oregon’s underlying incomes excluding the fading federal aid to continue to growth strongly, and to hold our relative position compared with the rest of the country.

Note for those interested in further reading, our office wrote a more detailed post on income, spending, and the outlook last quarter. Along with a look at how the federal aid muted the economic impact of job losses during the pandemic.

Posted by: Josh Lehner | September 20, 2021

Oregon Maximum Rent Increase 2022: 9.9%

What you need to know: The allowable rent increase for the 2022 calendar year is 9.9%.

See our office’s Rent Stabilization page for more, including a downloadable spreadsheet with all the data.

I know some of you may be scratching your heads given inflation is currently running hot and the recent deep dive into the outlook for inflation. The reason why next year’s maximum allowable rent increase is relatively tame comes down to fact the law uses as 12 month moving average. Specifically see ORS 90.323 (2) where it reads, in part, “the annual 12-month average change in the Consumer Price Index for All Urban Consumers, West Region (All Items).” Currently the economy is experiencing a rapid increase in inflation, but it takes some time for that to feed into a 12 month average. The current calculation includes some weak months along with the strong inflation readings in the past handful of months. Combined, they result in inflation of 2.9%, making the maximum allowable rent increase in 2022 9.9%.

As such, this also means that the current bout of inflation will mostly be reflected in the 2023 maximum allowable rent increase which our office will announce a year from now. This will be the case even if underlying inflation slows further in the months ahead. This is simply due to the difference between noisy monthly data and a more stable 12 month average. As a stylized example, you can see this difference in the chart below. The hypothetical scenario here has inflation slowing to a 2% annual pace (the Fed’s target) starting next month. You can see that a year from now the single month inflation readings would be back down, but the trailing 12 month average will still be elevated. This means 2023’s maximum allowable rent increase will higher than this year’s.

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